Ch.17 The practice of strategy Flashcards
Which individuals are involved in strategizing and what are their responsibilities?
- Chief Executives and Directors
- CEOs, often seen as the ‘chief strategists’, play a pivotal role in setting disciplined strategies. They are prone to hubris and benefit from diverse advice from top management teams and non-executive directors.
- Top management teams, including executive directors, contribute diverse insights but can suffer from
‘groupthink’. They need to develop skills for debating overall organizational strategy. - Non-executive directors contribute by shaping strategy processes and holding informal consultations with CEOs. Their roles are part-time and semi-detached.
- Strategic Planners
- primary responsibility for contributing to the strategy process. work on strategy, contributing
through important tasks like information and analysis, managing the strategy process, and assisting in special projects. - They do not take strategic decisions themselves.
- They work closely with the CEO, acting as a bridge between the corporate centre and businesses, ensuring alignment of strategies, and influencing strategic thinking.
- Middle Managers
Middle managers, traditionally seen as implementers, have a growing role in strategy making. They act as
information sources, ‘sense-makers’ of strategy, adapters as events unfold, and champions of novel ideas and strategies. - External Strategists
- There are two sets of external actors who often exercise influence from outside the organisation: strategy consultants and investors.
- External consultants, including big firms and boutique consultancies, play roles in design and facilitation of client strategy processes; analysis and option generation for clients, knowledge transfer, for example transmission of strategic best practices between clients; and implementing strategic change. Their value is debated, and effective
management of the consulting process is essential.
Investors, including venture capitalists, private equity, and activist investors, influence strategy processes and actual strategies. They advise, initiate strategic changes, and seek performance improvements…..
Name the activities of strategizing
- Strategy Analysis
- Strategic Issue-Selling
- Strategic Decision Making
- Communicating Strategy
Explain Strategy Analysis
Strategy analysis is essential, but it often deviates from the technical ideal. It can serve different purposes, including informational, political, symbolic, and as a form of procrastination. Risk for paralysis by analysis, where managers spend too long perfecting their analyses and not enough time taking decisions and acting upon them.
The different purposes of strategy analysis have 2 key implications for managers.
- Design the analysis according to the real purpose:
The range and quality of people involved, the time and budget allowed, and the subsequent communication of analysis results should all depend on underlying
purpose, whether informational, political or symbolic. Ex. consulting firms - useful for political and symbolic analyses. - Invest appropriately in technical quality: For many projects this will make a valuable addition to subsequent strategic decisions, but in other occasions, insisting on technical perfection can be counter-productive.
Managers should design analysis according to its real purpose and invest appropriately in technical quality, avoiding paralysis by analysis and ensuring meaningful contribution to strategic decisions.
Explain Strategic Issue-Selling
Issues compete for attention in organizations. Strategic issue-selling involves gaining the attention and support of top management and stakeholders.
to gain attention and support managers need to consider at least 4 issues:
Success in issue-selling depends on effective issue packaging, utilizing both formal and informal channels, deciding whether to sell alone or in coalitions, and careful timing…
Explain Strategic Decision
Decision-making is influenced by cognitive biases. Daniel Kahneman’s behavioural economics outlines methods to reduce biases through challenging assumptions, considering alternatives, and encouraging constructive conflict.
Regarding Strategic Decision, what are the 5 Common decision-making Biases according to Kahneman?
Kahneman highlights 5 common decision-making biases and suggests ways to mitigate them:
- Confirmation Bias
- Anchoring Bias
- Saliency Bias
- Affect Bias
- Risk Bias
What does each of the 5 common decision-making biases say?
- Confirmation Bias:
This bias involves favoring information that confirms preexisting beliefs and neglecting information that contradicts them.
Mitigation:
Ensure alternative options are always considered, shifting the discussion from affirmation to comparison of alternatives.
- Anchoring Bias:
This occurs when decision-makers fixate on initial information (the “anchor”) and adjust subsequent judgments around it, even if it might be irrelevant or outdated.
Mitigation:
Introduce different analytical methods (ex DCF) to challenge assumptions and bring out new
insights, preventing reliance on a single piece of information.
- Saliency Bias:
This bias happens when a particular analogy or example disproportionately influences thinking, including the “halo effect,” where past success is assumed to guarantee future success.
Mitigation:
Actively seek other analogies and assess differences between past cases and current situations to avoid overrelliance on specific examples.
- Affect Bias:
It refers to the distortion in decision-making due to emotional attachment to a particular option, leading to exaggeration of benefits, also known as “champion’s bias.”
Mitigation:
Check for signs of discomfort among team members and encourage diverse viewpoints to avoid overly optimistic assessments.
- Risk Bias:
This bias involves distorted perceptions of risk, either through over-optimism or through risk aversion.
Mitigation:
Utilize an “outside view” by considering the experiences of other organizations and adjust incentives to balance the fear of failure and the desire for success.
Not all strategies result from explicit decision-making; some are emergent and develop without conscious choice.
Regarding “Communicating Strategy” how can strategies be communicated?
Effective communication of strategy is vital and involves advocacy and inquiry. Different stakeholders require tailored messages, and communication is a two-way process.
Strategies can be communicated through:
- Narrating strategy:
(The elements of strategy need to be assembled into a consistent and motivational story). - Visualising strategy: (a picture is worth a thousand words. To communicate effectively, it is often valuable to translate a strategy into powerful graphics, something that is sometimes called ‘stratography’).
- Embodying strategy: (strategists need to walk the talk of their strategies).
Name the Strategy Methods
- Digital Strategy Tools
- Strategy Workshops
- Strategy Projects
- Hypothesis Testing
- Open Strategy
How are Digital Strategy Tools impacting strategy?
Digital tools are increasingly impacting strategy through:
- Environmental Analysis:
AI aids in scanning large datasets to identify trends and predict successful investments. Digital visualization techniques further enhance this analysis. - Strategic Option Generation:
Platforms like Yammer and IBM’s strategy jamming technology facilitate crowdsourcing of strategic ideas, while digital polling informs decisions. - Strategy Implementation and Adjustment:
CEO blogs and social media, along with virtual town halls, foster organization-wide communication and interpretation of strategic initiatives.
What are Strategy workshops?
Strategy workshops are intensive sessions, typically involving senior managers, focusing on formulating, reviewing, and communicating strategy. The success of a workshop depends on clarity of purpose, use of strategy tools, facilitation, and support from sponsors. However, they face challenges like becoming routine or detached from organizational realities.
Strategies for effective workshops include:
- Identifying Agreed Actions
- Establishing Project Groups
- Nesting of Workshops
- Visible Top Management Commitment……
What are Strategy Projects?
Strategy projects, addressing specific strategic issues, ensure translation of intentions into actions and broader managerial involvement. Effective management involves:
- Clear Brief or Mandate
- Top Management Commitment
- Milestones and Reviews
- Appropriate Resources
Attention to the balance between regular duties and project responsibilities, along with oversight to prevent “initiative fatigue,” is crucial.
What is Hypothesis Testing?
Hypothesis testing, adapted from scientific procedures, sets priorities in exploring strategic issues. It begins with a descriptive hypothesis, tested with real-world data, leading to prescriptive hypotheses.
Quick and Dirty Testing
(QDT) helps in rapidly evaluating hypotheses based on available data and experience.
What is Open Strategy?
Open strategy involves wider inclusion of internal and external stakeholders and increased transparency. Methods
include strategy workshops, strategy projects and task forces, delegated decisions, and the use of social media and polling technologies. While it can enhance strategy formulation and implementation, challenges such as slowing down the process, undermining authority, risk aversion, and information leakage exist. The level of inclusion should
vary based on the nature and urgency of the issue.
What are the implications for the strategy methods?
Digital Tools:
The advent of digital tools in strategy is transformative, offering diverse ways to analyse, generate, and implement strategies.
Workshops and Projects:
While workshops and projects are instrumental, their design, alignment with organizational realities, and management are pivotal for success.
Hypothesis Testing:
This approach, adapted from science, is valuable for prioritizing and validating strategic propositions.
Open Strategy:
Inclusion and transparency are double-edged, offering benefits but posing challenges, necessitating careful consideration of the degree of openness based on the strategic issue at hand.
Examples:
* Ericsson and IBM utilize specialized communities and strategy jamming technology for idea generation.
- Microsoft employs virtual town halls for strategic communication.
- Valve’s ‘rule of three’ and IBM’s strategy ‘jams’ exemplify inclusive decision-making.
- Zurich Insurance and the city of Vaasa demonstrate the application of strategy projects and workshops for inclusive strategy development.
